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Bull of the Day: Barrick Gold (GOLD)

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Barrick Gold Corporation (GOLD - Free Report) is generating record levels of free cash flow with gold near all-time highs. This Zacks Rank #1 (Strong Buy) is expected to more than double its earnings in 2020.

Barrick is one of the world's largest gold miners with gold and copper mining operations in 13 countries in North and South America, Africa, Papua New Guinea and Saudi Arabia.

Big Beat in the Third Quarter as Gold Price Soars

On Nov 5, Barrick reported its third quarter results and beat the Zacks Consensus for the second straight quarter.

Earnings were $0.41 versus the consensus of $0.32, or a beat of 9 cents.

It increased its operating cash flow by 80% quarter-on-quarter to $1.9 billion and free cash flow by 151% to a record $1.3 billion.

Debt net of cash declined 71% to $417 million, compared to $1.4 billion in the prior quarter.

It's gold production year-to-date was 3.6 million ounces, which kept the company on track to meet its yearly guidance of between 4.6 and 5.0 million ounces.

Analysts Raise 2020 and 2021 Earnings Estimates

Given the strong quarter, and elevated gold prices, it's not surprising that the analysts are bullish on Barrick for 2020 and 2021.

6 estimates were revised higher for 2020 in the last month, pushing the Zacks Consensus up to $1.10 from $0.96 during that time.

That's earnings growth of 115.7% as the company made just $0.51 in 2019.

2021 is looking like more of the same as 2 estimates have been revised higher in the past 30 days as well.

The Zacks Consensus has jumped to $1.40 from $1.33 during that time. That's another 28% earnings growth.

Giving Cash Back to Shareholders

With gold at new records in 2020 and copper prices on the rise, Barrick is now awash in cash.

It raised its dividend in the quarter by 12.5% to $0.09. It was the third time in the past year it has raised the dividend.

The dividend has tripled since the announcement of the Barrick-Randgold merger in September 2018.

“The Board believes that the current dividend increase is sustainable and is reflective of the ongoing robust performance of our operations and continued improvement in the strength of our balance sheet, with total liquidity of $7.7 billion, including a cash balance of $4.7 billion, and a debt net of cash position of just $0.4 billion as of the end of the third quarter, as well as no material debt repayments due before 2033,” said CFO Graham Shuttleworth.

The dividend is currently yielding 1.3%.

Is Barrick Cheap?

The gold miners, including Barrick, have been on a run in 2020 as gold hit new all-time highs.

Barrick has gained 30% year-to-date but, with gold weakening in the prior few months, it's fallen 19.5% the last 3 months.

Barrick trades with a forward P/E of 22.3 but it's certainly cheaper than it was in September 2020, which was the highs before the recent pullback.

Other gold miners also have great cash flows and strong earnings growth. Competitor Newmont Corp. (NEM - Free Report) is a Zacks Rank #2 (Buy).

For investors looking for a way to get into the precious metals trade, with a dividend to boot, Barrick is one to keep on the short list.

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